To me it is pretty clear why the CEO of DSUP did not want to accept the DIP from the hedge funds. After acquiring a majority of the outstanding debt, OCM, Whippoorwill and Solus together refused to tender their bonds (in spite of the numerous extensions by DSUP to the tender offer). Knowing that Dayton had a deadline to restructure under the terms if its then existing loan covenant with MS, the funds figured they could take over the firm by forcing it to file and accept DIP provided by the funds. The funds acted on the premise that the firm had value in excess of the total debt (bank loan and bonds) and, thus, would be picking it up cheaply. They expected the judge to approve their DIP proposal which was initially had much more attractive terms than GE's. They should have anticipated that DSUP management would work with the bankruptcy court and GE to make sure this did not happen.
I believe equity in Dayton had value before they entered chp. 11, but it is unclear to me whether any will remain when they re-emerge...In my opinion, it is possible....
